Of course, a 2020 year in review can only be dominated by the COVID19 pandemic. The health, economic and societal damage is not yet foreseeable, and as challenging as this year may have been for many of us, a crisis of this magnitude is always, in retrospect, a turning point. The opportunity that lies in this crisis is digitization, which has already experienced an enormous boost - in all areas of life. As an infrastructure provider for financial services, we are naturally benefiting from the increased trend. For example, toward cashless payment or the stronger demand for digital services, such as online loans. But first things first, because 2020 actually began quite "normally" in the banking/fintech industry: Namely, the way 2019 ended: The discussion about interfaces continued and largely determined the content of the first quarter.
Beginning of 2020: The first bank interfaces will be released to the market
In January 2020, BaFin had released the interfaces of the savings banks, NordLB and BayernLB into market probation. In any case, this was a long-awaited step after the 2nd stage of PSD2 had already come into force in September 2019. Accordingly, the third-party providers involved in the process were pleased with the market readiness of the first banking interfaces - as Stefan Krautkrämer confirmed in an interview with FinanceFWD: "The PSD2 interface of Sparkasse is ready for market probation - we are now testing it under real conditions."
But despite the progress, there is still a long way to go: Many other interfaces are still far from being at the appropriate level to offer the functional equivalence required by PSD2, as FTS chief legal officer Caroline Jenke told Handelsblatt. She added that it was therefore not yet possible to plan a migration to the banking APIs "because data that is absolutely required, such as the name of the account holder, is not yet supplied or there are other technical problems." On the topic of PSD2, Caroline Jenke also participated as a panelist at the "Payment Exchange" in early February: 180 payment fans - including 22 speakers for six panels and six keynotes. Three winners of the Golden Transaction did the honors at SOHO Haus. In addition, CMO Martin Schmid and Maximilian Eberhardt (Business Development) were speakers at Finovate Europe in Berlin in February and presented FinTecSystems on a large stage. However, the dominant topic in the industry initially remained the banking interfaces.
A few weeks later, there was still little sign of progress on the banking API side. In the interest of all market participants, high-performance and fast banking APIs are the basis for smooth services. Especially with regard to popular end-customer banking apps, trouble-free access to account information is needed. At the beginning of March, this was not yet the case for many bank interfaces. Neither the performance nor the functional scope (keyword: data parity) was guaranteed at that time - this was the reason for us to also make public that there was still a lot to do: "Currently, it is de facto impossible to get stable and functional PSD2 interfaces. Currently, FinTecSystems does not bring a single online loan via a PSD2 interface to the decision, it is simply not possible. Therefore, there can currently be no exemption from the fallback," explained FTS COO Hannes Rogall in a guest article in IT-Finanzmagazin.
A country shuts down: The first lockdown in March - FTT assistance for SMEs
With the rising number of COVID-19 cases in the first weeks of the year and the horrific images from neighboring countries in mind, the German government decides to take an action for which there is no blueprint: From mid-March, Germany shuts down completely and the corona crisis has the country firmly in its grip. A special situation for SME's - because for them it was now necessary to quickly get liquidity to pay bills, receivables, fixed costs, salaries, etc.. In this situation, which was probably the sharpest full stop of our national economy in history, FTS helped with its solution for faster liquidity. First, starting in March, the digital credit check was offered free of charge until further notice - an important service for companies. After all, as IT Finance magazine rightly writes, "the length of time it takes to check creditworthiness may be crucial to whether a company receives new funding in time or slips into bankruptcy for lack of liquidity."
At FTS, we continued to expand our assistance to SMEs a few weeks later, partnering with Creditreform, the credit reporting agency for businesses, in May. Together we are stronger was the message behind this cooperation: "The combination of credit bureau data and real-time account view gives companies and banks a quick overview of the applicant's creditworthiness. This can lead to a significantly faster loan approval and is a relief for companies, house banks and KfW and the digital credit check temporarily offered free of charge," explained Martin Schmid in the trade magazine "gi - Geldinstitute".
Keeping an eye on the insurance market: great potential from account information
In addition to Corona, there were also some encouraging developments in spring in the market to which we are increasingly turning: In the insurance sector, after comparison platforms such as Check24, verivox and others, we were able to gain another heavyweight in the market with the Allianz financial platform "HeyMoney". As the trade magazine "Versicherungsbote" reported on the cooperation, "FinTecSystems also relies on machine learning and, in addition to the categorization of sales data, also provides, for example, budget calculations, risk analyses, sales data analyses as well as standardized checks" for the new financial platform. FinTecSystems presented the cooperation in detail at the industry event "Digisurance".
The potential of machine learning and AI methods in the insurance industry is particularly great, as our CPO, Dr. Tobias Ruland, also explains in detail in a guest article in the "Versicherungsbote". According to the article, intelligent data products based on account information can be used profitably in some areas in the future: "So, in addition to supporting sales and application processes, account information can also be used in the actuarial office and, to a certain extent, in fraud prevention," Tobias Ruland writes. This includes, among other things, the identification of so-called "key life events", such as buying a house or getting married - a topic that is definitely already being implemented in the industry: Jung, DMS & Cie (JDC) is another well-known company in the industry that will be using FTS in the course of the year. The Munich-based broker pool has integrated the FTS account check into its finance and insurance app "allesmeins". "An account data analysis can be used, for example, to identify key moments in life such as marriage or buying a house at an early stage - an ideal basis for tailored customer advice," says Martin Schmid, explaining the added value of the FTS account check in this use case.
After the 1st Lockdown: Open Banking Gains Momentum
After Germany came through the first wave of the COVID 19 pandemic quite well, the first consequences of this special situation already became apparent in the current year: The rising e-commerce and the increased use of digital offers by citizens made themselves felt in the industry in general and at FTS in particular. In an interview with the industry service "FinanceFWD", for example, the management team was able to report that revenue growth in 2020 will be higher than planned, which was primarily due to customer acquisition and the sharp rise in transaction numbers. As a result, FTS will also end up with a profit in 2020, a milestone for the young company and not something that can be taken for granted in the fintech market: "Business is growing faster than our planning, and the Corona crisis has also accelerated the online trend," Stefan Krautkrämer confirms in an interview with FinanceFWD editor Caspar Schlenk. For the further growth course, another round of financing is now being sought: "Now Fintecsystems is again on the lookout for capital to accelerate growth: the startup wants to raise 12 to 15 million euros from investors."
Following the general trend of greater digitization, open banking is also on the rise - although there are still some reservations among consumers, as a study by management consultants PWC shows, reported by Handelsblatt. However, the trend is basically strongly upward, because especially in the second half of the year, the transaction figures have risen strongly, as the Handelsblatt finds out in conversation with market participants: "FinTecSystems recorded 'clear seven-digit transaction figures' in August, according to its own information, which is more than a quadrupling compared to the same month of the previous year. Only successful data accesses and triggered payments would be counted." In addition, the successful cooperation with SWK Bank will start in August. For the institution, which is known for one of the first fully digital online loan application lines, FTS provides the categorization of account data and thus a comprehensive financial picture of the applicant. As a result, credit decisions are made in real time, significantly speeding up the process to disbursement. Consumers are embracing digital credit scoring: Almost half of the applicants use the account view from FTS.
September 2020: one year of 2nd stage PSD2 - where are we after 12 months?
In Germany there is a long tradition of Open Banking, this becomes clear again, among other things, when BTX 2020 celebrates its 40th anniversary in this country. The technology,which was developed in Germany,once opened up the possibility of online banking. It is therefore not surprising that in view of the approaching one-year anniversary of the 2nd stage of PSD2 in September, the question quickly arose as to where Germany stands in open banking today. Due to the intensive discussion among market participants, the quality of the interfaces is better than in other large EU countries, Stefan Krautkrämer states in an interview with "gi - Geldinstitute": "Here, we in Germany are definitely further ahead than other large markets such as the UK or France." Nevertheless, it becomes clear towards the end of the year: even if there are some rays of hope, even one year after the 2nd stage of PSD2, we are still not where we could be in terms of the quality of interfaces across the board. That is the bottom line of a major API test conducted by IT Finance magazine.
With the help of data material from FTS, the trade magazine took a close look at the bank interfaces on offer. For the evaluation, the functional scope or the structure of the interface as well as its technical availability were tested. The result: The Sparkasse API and the Volks- und Raiffeisenbanken API share first place with an overall score of 2.2.
This means that these interfaces, which have a good range of functions, can hope for an exemption from BaFin. Nevertheless, there is a qualitative gap behind them, as Hannes Rogall notes in an opinion piece in IT-Finanzmagazin: "For example, we were able to determine in our tests that data parity for important features between online banking and the PSD2 API is still not fully given. (...) Here, a speedy improvement in terms of ensuring data quality and avoiding discrepancies in content is desirable." Whether therefore the one-year birthday celebration of the PSD2 2nd stage is a reason to celebrate was unclear at first glance. This question is therefore explored by Caroline Jenke and André Bajorat as well as Cornelia Schwertner in the Payment&Banking Podcast, which is well worth listening to, under the title "Happy Birthday PSD2 - A Review".
Product highlights 2020: fully automated online credit with DKB.
Despite all the challenges that still need to be overcome, one thing is clear: Open Banking enables innovation and drives the market to think in terms of the customer. One of the flagship products in this area is certainly DKB's fully automated online loan. The direct bank launches the "Sofortkredit" for new customers in October. No human being is involved in the entire loan application and approval process, right through to disbursement. The algorithm-based credit decision supports FTS with account access and a categorization of sales. The precise data clustering by FTS is helpful: "The accuracy in the categorization of data is more than 98 percent. The categorized sales data forms the basis for the bank's internal, fully automated review and credit decision on the application. This is also linked with other scoring-relevant data such as credit agencies," reports IT-Finanzmagazin. This announcement was also very well received in English-speaking countries. For example, the trade media FinEXTRA and the Paypers, among others, reported on the partnership between DKB and FTS.
Other highlights in the area of product development in 2020 were the successfully introduced account rating, reconciliation (payment reconciliation), the profit-loss check (corresponding to a "P&L"), the liquidity forecast and the expansion of bank coverage to include the neo-banks Revolut, Kontist and Bunq. More than 6,000 banks can now be reached via FTS's interfaces, which corresponds to bank coverage of over 99 percent. In addition to SWK Bank, which uses FTS to check creditworthiness, Penta, Agicap, ERSTE Group, Arnadi Bank and Sberbank are other important customer wins in the FinTech and banking sectors.
Thus, in terms of business development, we at FTS can be very satisfied with an intensive 2020 that held many twists and surprises in store. In total, we were able to win 62 customers in 2020, expand our team by 16 to a total of 60 employees and also reach break-even.
For 2021, we hope that we will be able to master the task of overcoming the pandemic for society as a whole and therefore look forward to the next year with great hope and a healthy dose of optimism.